Revenue Method P
Revenue Method P recognizes job-to-date earned revenue as a percent complete @ billing of the fee, plus job-to-date reimbursable expenses.
Job-to-Date Revenue = (Percent Complete*Fee) + Job-to-Date Reimbursable Expenses
To specify an overriding percent complete, use Update % on the Revenue Generation toolbar or enter it on the Budget & Revenue tab of the project record.
Revenue Method P is typically used for lump sum contracts. Some firms also use Method P on projects using time-based contracts with an upset limit.
Revenue recognition is based on an estimate of progress made, often linked to the completion of phases of a project. This progress estimate is usually based on a percent complete that has been calculated and updated for each accrual (Method P) although it can also be based on an estimated multiplier (Method M).
Method P generates the most accurate revenue figures, provided that the project's percent complete data is updated regularly. If your firm does not have the staff resources to maintain current percent completes, consider assigning Method M, which uses estimated percent completes. It generates less exact revenue amounts but involves less maintenance.
The hierarchy for determining the percent complete to use for Revenue Method P is:
- The Overall Percents Complete on the Budget & Revenue tab in the Project Info Center; if none is specified, Vision uses the sum of Labor Percents Complete and Expense Percents Complete.
- The calculated percent complete in the Billing budget in the Project Budget Worksheet.
Vision calculates revenue as Overall Percent Complete times Compensation, plus job-to-date reimbursable expenses at Cost. You specify both Compensation and Overall Percent Complete on the Budget & Revenue tab of the Project Info Center.
The Job-to-Date Reimbursable Expenses portion of the equation is retrieved from the project's expense postings, not from its billing terms.
If you use method P, determine whether the percent complete you use is a weighted average of the percentage of in-house and consultant labor. Otherwise Vision may recognize revenue ahead of expenses, which causes financial performance to appear better than it actually is.